I think it depends on what your definition of "need"
Do you need two watches, do you need twenty four pairs of shoes - 8 pairs of jeans, HDTV, a TV in every room etc - it's freedom of choice. Some would argue that they do. I would argue that I don't want to drive a Skoda or a 1.6 litre petrol Toyota (Nothing against them used for arguments purposes) If I had a crash in the toyota against anyhting bigger than a mini - I and my children would be in trouble. My needs are different to other peoples and your budget defines your needs and vice versa. It also depends on mileage used - I dont do 70k anymore more - more like 8k in the X5 - so I doubt whether I'm poluting nowadays more than when I used to drive my 1.9litre diesel scenic.
Yes tax bigger cars more - but only if they do the mileage and are using the fuel that pollutes.